TRANSCRIPT: ROBERT RUBIN 9/26 PRESS CONFERENCE IN BEIJING
(China WTO accession will require "real market opening")

Beijing -- The United States is a very, very strong advocate of China becoming part of the World Trade Organization (WTO), but the Clinton administration believes it has to be on commercially viable terms, according to Secretary of the Treasury Robert Rubin.

"We believe it has to be done on a basis that represents real market opening in China," he said.

During a press conference with Chinese Minister of Finance Liu Zhongli September 26, Rubin said: "In our judgment, that's what the WTO is all about, that's what the international trading system is all about. And basically, just as open markets have been very good for our United States and countries around the world, we believe it will be very beneficial for China. In terms of timing I can't predict that. All I can tell you is that we are a very strong advocate of China joining WTO on commercial terms."

Rubin noted that the United States has a large trade deficit with China, despite differences over how either side calculates that deficit. "I don't know that we will arrive at a uniform set of figures because of the factors that account for the differences," he said. "But either way you look at it, it is a large trade deficit and that large trade deficit creates problems both economic and political in the United States. I think the way that will get solved over time, hopefully, is through greater market opening in China with the WTO being central to that."

Rubin welcomed China's plans for further tariff reductions on October 1. "It is movement in the direction of opening markets in China which I said before I think is very much in China's interest and the interest of the rest of the world. In terms of WTO membership there are obviously a lot of other issues including many non-tariff barriers," he said. Rubin also commented on China's plans to restructure state-owned enterprises, saying it is a necessary step in moving forward on reform in China.

"There is no question that the United States and China have an enormous mutual self-interest in having a stable, solid and mature relationship," Rubin said. "And that interest lies not only with respect to the economic well-being of both our countries, but also to the opportunity that relationship could provide for providing leadership with respect to the issues of global economy and more generally the post-Cold War world."

Following is the transcript of the press conference:

(begin transcript)

Opening remarks by Chinese Minister of Finance Liu Zhongli:

LIU: First of all I would like to thank all of the journalists who are participating in the news conference today. We have invited Secretary Rubin to co-chair this tense session of the JE Committee with me. This is a bilateral economic forum set up in 1980 between the People's Republic of China and the United States of America. In this year we have conducted extensive discussions over each of our common interests with our two countries. It plays a very positive role in promoting the mutual understanding and the mutual cooperation. Since the ninth session of the JE Committee in Washington we have made quite a lot of positive achievements in many fields, such as, the financial sectors have been reformed in a much deeper way. Foreign financial institutions in China have been increased. Out of which we have approved the opening of nine foreign banks to be engaged in the RMB business in Pudong, Shanghai. This also included Citibank of the United States, and last year we have achieved the RMB free convertibility on the current account.

China's customers of the administration has resumed the negotiation over the customers mutual assistance agreement with our American counterpart. Today's JE session was held in three subgroups. That is microeconomic policies and the trades financial issues in the law enforcement. Both of our sides have exchanged experiences and practices over the ways to improve the economic growth and maintain a low level of inflation rate. We also discussed issues like international payment, trade, foreign reserves and the foreign exchanges. We also take the opportunity to discuss the development of financial market, strengthening of the supervision monitoring, the market entry of the banks of two countries, and also the promotion of a free information flow of the capital markets. The issues we discussed also involved how to cooperate in customs service, how to combat against the financial crimes anti-money laundering. We also take the opportunity to discuss how to strengthen the cooperation in the international financial field including China's entry to the World Trade Organization, China's application for entry to the Intra American Development Bank and the Economic Cooperation Development Bank in the Middle East. You can see all of the details in our joint communique.

After Mr. Rubin's visit to China and participating in the tense session of JEC President Jiang Zemin will visit the United States, so this meeting is of great significance. Yesterday, Mr. Rubin met with Vice Premier, Mr. Zhu Rongji and about two hours later he will also meet with President Jiang Zemin. So now I would like to invite Mr. Rubin to give his statement:

RUBIN: Thank you very much Mr. Minister. Yesterday at the meeting with the Vice Premier, I think he summed up the purpose of the JEC very well. He said that it had been started under President Carter and it had provided a forum in which each of our nations could get a better understanding of the issues that effect both of our nations and that that understanding in turn would then provide the framework for moving forward on the issues that are before us now and for dealing with other issues that arise, as they will from time to time. I think that what most struck me about these discussions, including the discussions that we had yesterday with the Vice Premier, was how direct and open they were. These were informal dialogues about issues of great importance to both our countries, rather than formal presentations to each other of our formal positions. And I think the consequence was that we really did accomplish a great deal in terms of advancing our understanding and moving forward with respect to each of us having a better appreciation of the others views.

Let me say more generally that I think that there is no question that the United States and China have an enormous mutual self-interest in having a stable, solid and mature relationship. And that interest lies not only with respect to the economic well-being of both our countries, but also to the opportunity that relationship could provide for providing leadership with respect to the issues of global economy and more generally the post-Cold War world.

Minister Liu provided a very complete list of the issues that were discussed and I won't repeat that list. I would simply say that for our part, the United States, we need to invest far more heavily in understanding and focusing on economic developments in China so that our understanding will be at the level that will enable us to function most effectively with officials from the Chinese Government in the years and decades ahead.

And I will conclude by saying that I think without any question the JEC discussions, as well as the discussions yesterday with the Vice Premier and other discussions we have had with economists and others while we have been, the two days that we have been in Beijing and the day before that, Xian, will prove very valuable as part of the framework for the discussions, the economic issues of the summit in late October in Washington.

Q: A couple of questions Secretary Rubin, could you tell us did you reach an agreement on financial services during your visit now, and if not, is there any reason for the delay because it was expected. And secondly, there is a range of visits between the U.S. and China going on including Commerce Secretary Daley's visit in a couple weeks time. Is there any intention to try to compartmentalize different aspects of the relationship so that the Daley visit will involve most of the economic signing, the projects, the Boeing aircraft perhaps, power stations and the like, can you perhaps tell us more about that?

RUBIN: Sure, let me respond to your first question. There was no expectation that there would be an agreement with financial services here in Beijing, what there was, and I think, hope, an expectation that we could have a very thorough and candid and open discussion of the views in China with respect to opening up their financial sector over time and we had, I think, really a remarkably good conversation conducted in my view and from my perspective at least, in the context of the very long paragraph of the Vice Premier's speech in Hong Kong in which he addressed the need to build a financial sector in China.

On your second question there is no compartmentalization. Quite the contrary, we coordinate very closely, we have frequent China meetings at the White House and since we have different responsibilities, we may carry out different parts of the coordinated policy, but it is a coordinated approach to a coordinated policy.

Q: I am from the Xinhua News Agency. I have two questions for Secretary Rubin, the first one, this tense session of JEC Committee is held before President Jiang Zemin's visit to the United States, what kind of a special significance do you suppose these, the outcome of the JEC, will effect upon President Jiang's visit to the United States? The second question is concerning China's entry to WTO. Nowadays several countries have reached an agreement with China on supporting China's application. How long do you think China can reach an agreement with United States on WTO entry?

RUBIN: The answer to your first question is I think that as it has turned out the Joint Economic Committee meeting will be very helpful because when we go back, Dr. Rivlin and I and others who were here, Dr. Rivlin of the Federal Reserve Board and I, and others who were here, can give the President I think a much better understanding of what occurred at the Fifteenth Party Congress, what it means and more generally views of Chinese officials with respect to the various kinds of policy issues that are of concern to our two countries. On WTO our position remains unchanged. We are a very, very strong advocate of China becoming part of the WTO, but we believe that that has to be on commercially viable terms, which means real opening in China. In our judgment, that's what the WTO is all about, that's what the international trading system is all about. And basically, just as open markets have been very good for our United States and countries around the world, we believe it will be very beneficial for China. In terms of timing I can't predict that. All I can tell you is that we are a very strong advocate of China joining WTO on commercial terms.

Q: Minister Liu, I am David Wessel from the Wall Street Journal. Could you tell us what effect you think the currency problems and financial market problems in Southeast Asia will have on China and its willingness to open its financial markets and make for capital account convertibility?

LIU (through interpreter): The free flow of capitals will surely bring benefits to countries, however, it also causes risks. This has already been proven by the financial termoils in many countries. In line with the opening of the capital market, a country should further strengthen their banking supervision and legislation. This is extremely important for developing countries. Thank you.

Q: For Mr. Rubin, first I would like to know your comment on China's recent reiteration that it should be treated as a developing country in the WTO. The second question is, we know that China and the U.S. have different opinions on trade largely due to the different methods and it is reported that the two sides have some negotiations on this issue recently. Do you think the two sides will reach some agreement on the calculation method agreed by the two sides in this year or the next? Thank you.

RUBIN: On your first question I think that dealing with semantic questions about developing and non-developing countries isn't really fruitful as you focus on the questions of WTO. China has a very large economy. China has been enormously successful for quite some number of years in terms of generating economic growth. And I will just repeat what I said before -- we are very, very strong supporters of China joining WTO, but we believe it has to be done on a basis that represents real market opening in China.

On the question on the way we calculate the trade deficit, I don't know that we will arrive at a uniform set of figures because of the factors that account for the differences. But either way you look at it, it is a large trade deficit and that large trade deficit creates problems both economic and political in the United States. I think the way that will get solved over time, hopefully is through greater market opening in China with the WTO being central to that. There are issues with respect to the exchange rate that I think are quite relevant and then there has to be a continued focus in the United States amongst our companies in doing business in China.

Q: Mr. Rubin if I could ask you, you have made reference to human rights when you spoke yesterday at the University and your communique says a little bit about the ban on exports made with prison labor. I want to ask you what did you talk about, specifically as you can, about that ban. You are aware criticism from some people that you can't verify that in China? You can't go to prisons and see what is going on. Did you raise that question? What answer did you get? And do you have any sense whether you are making some headway on that?

RUBIN: Exporting goods made by prison labor violates, as you know, violates Chinese law as well as American law. Exporting it violates Chinese law and importing to the United States violates American law. We did discuss this issue very directly, and particularly the sporadic implementation of the '94 agreement and I think it would be fair to characterize the discussions as representing a view on both sides that we need to look at this again and see if we can make implementation more effective. I came out feeling that we made some progress with respect to getting a focus on getting more effective implementation on our inspection agreement. Although it's certainly a difficult issue and the proof will be in the pudding.

Q: Minister Liu, I'm David Sanger from the New York Times. Your Trade Minister Madame Wu Yi said recently that China doesn't really need entry into the WTO because it's doing pretty well in the trade arena even without it. I'm wondering if you agree with this assessment? And if you could specify for us what the biggest difficulties are in reaching an agreement right now what do you think are the biggest roadblocks?

LIU (through interpreter): China is willing to join the WTO and we should say that China should join the WTO because China has foreign trade totals three hundred billion U.S. dollars, so for such a big foreign trade country we should join WTO.

However, for the MOFTEC Minister Madame Wu Yi, her comment is also reasonable to a certain extent. If the requirement for China's entry to WTO doesn't get along with China's situation, that is to say it is not a requirement for the developing country and the requirement is too demanding, then we will not join the WTO. So from this point of view, I should say that we will not be that anxious to join.

However, China also, if the requirements for China's entry harmonize with the Chinese situations we will still like to join the WTO. Such as last year we reduced a tariff by more than 35 % and by the end of last year we have achieved RMB free convertibility on the current account. In the meanwhile we have approved the opening of nine foreign banks to be engaged in the RMB business, especially in October we once again will reduce the tariff and the average figure is 26%. As President Jiang Zemin mentioned in the Philippines, by the end of the century we will reduce our tariff and reach a standard as an average figure of tariff of the developing countries and we will keep our promise. Thank you.

Q (through interpreter): I am from China Finance and Economic News. I have two questions for Secretary Rubin. The first one, starting from the coming October 1st, China will once again reduce the tariff. What is your comment on the new tariff? The second, in the Fifteenth Party Congress, President Jiang Zemin again mentioned that we will further enhance our opening and reform, and one of the key components is the restructuring of the state-owned enterprises. Our strategy is to give high priority to the large-size enterprises and lease the smaller ones. So what do you see with this kind of approach?

RUBIN: And do what with the smaller ones, I'm sorry?

Q: The smaller enterprises...(inaudible)...

RUBIN: Give priority to the higher ones in terms of the diversification of ownership?

Q: So as to achieve the diversified ownership...

RUBIN: Right, okay I got it. On the first question we welcome the tariff reduction and it is movement in the direction of opening markets in China which I said before I think is very much in China's interest and the interest of the rest of the world. In terms of WTO membership there are obviously a lot of other issues including many non-tariff barriers. On the question of the state-owned enterprises I, we, learned an enormous amount about the issues involved in the diversification of ownership, the interrelationship between state-owned enterprise and the banks, the effect on employment and the other issues that flow from this really dramatic step forward in reform. I don't think that I have a useful evaluative comment on the strategy other than to say that I think clearly, we think clearly, that this was a very important and dramatic step in moving forward and a necessary step in moving forward on reform in China and it will present substantial challenges of the kind that I have already mentioned, but is an absolute request in our judgment and obviously it is as well and more importantly in the views of the Chinese leadership for China, to have the kind of economy it wants to have in the years and decades ahead.

Closing Announcement: We are running out of time and I am sorry that we have to close this press conference because Secretary Rubin is on his way to see President Jiang Zemin. Thank you.

(end transcript)

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